2023 (5) TMI 846 - HC - Income Tax

Reopening of assessment u/s 147 - Penny stock transaction - information received from Investigation Wing related to penny scrips in which various beneficiaries had transacted - HELD THAT - In the present case the AO has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie was found to be a shell company. The assessee had claimed exempt of long term capital gain by way of sale of share of such company. Notice u/s 148 was issued calling upon the petitioner to deliver a return in the prescribed form for the assessment year 2012-13. The authority received information from Investigation Wing, Kolkata during the year under consideration that the assessee made transaction in penny stock in the scrip of M/s Twenty First Century (I) Limited for an amount of Rs. 6,49,000/-. It is settled law that sufficiency or adequacy of the reasons for the issuance of the notice for reopening of the assessment is not required to be gone into at this stage of the reopening. It can never be said that the final outcome of the proceedings has been derived at by the authority by issuing a notice for reopening. On the basis of material before it as highlighted above, if the Assessing Officer was satisfied to harbour reasons to believe that there was escapement of income and if on such basis, he has exercised his powers under Sections 147, 148 no fault can be found. This Court is in complete agreement with the aforesaid two decisions relied upon by the learned advocate appearing for the respondent- Authority namely; Purviben Snehalbhai Panchhigar 2018 (11) TMI 139 - GUJARAT HIGH COURT and Pushpa Uttamchand 2022 (5) TMI 1158 - GUJARAT HIGH COURT - Special Civil Application dismissed.

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Whether the reassessment can be based solely on information from the Investigation Wing.
3. Adequacy and sufficiency of reasons for reopening the assessment.

Summary:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged a notice dated 26.03.2019 under Section 148 of the Income Tax Act, 1961, for the assessment year 2012-13. The petitioner argued that the notice was invalid as it was based on incorrect facts and without independent verification by the Assessing Officer. The respondent contended that the notice was issued after recording reasons to believe that income had escaped assessment and with necessary approval from the Competent Authority.

2. Whether the reassessment can be based solely on information from the Investigation Wing:
The petitioner objected that the reassessment was based solely on information from the Investigation Wing without the Assessing Officer forming an independent opinion. The court noted that the respondent had relied on a detailed investigation report and the statement of Mr. Anil Kumar Khemka, which indicated that the petitioner had traded in penny scrips and received accommodation entries. The court distinguished the present case from the cited cases of Surani Steel Tubes Limited and Principal Commissioner of Income Tax-12 v. Smt. Krishna Devi, stating that in those cases, the reopening was based on borrowed satisfaction without independent verification.

3. Adequacy and sufficiency of reasons for reopening the assessment:
The court emphasized that at the stage of reopening, the sufficiency or adequacy of the reasons is not required to be examined. The court referenced the cases of Purviben Snehalbhai Panchhigar and Pushpa Uttamchand, which held that if the Assessing Officer has cause to believe that income has escaped assessment based on relevant material, the reopening is justified. The court found that the respondent had sufficient material to form a belief of income escapement and had followed due procedure, including obtaining necessary approvals.

Conclusion:
The court dismissed the Special Civil Application, upholding the validity of the notice under Section 148 and the reopening of the assessment based on the information and material available to the Assessing Officer.